To look at the numbers one would be hard pressed to call South Korea's current economic situation a crisis. Since the 1997 financial collapse and the more recent consumer credit turbulence, the economic situation has stabilized. Interest rates are low. Spending and exports have reached record levels, as have corporate profits. But on the ground, says David Chon, a principal at Discovery Capital Management, a silent crisis is playing out. Koreans have lost confidence in their economy and have become dangerously risk averse, he said, and the country may fall permanently behind the rest of East Asia if this pattern continues. The tempo of economic development in Asia has never been faster. If Korea could plug into the region's phenomenal growth it could easily reach its goal of $30,000 per capita GDP. In Chon's view, however, the business risk that South Korea thrived on for 50 years has become much less palatable to Koreans burned by their losses in the late '90s. Older managers have shifted gears; instead of seeking new profits they're paring back, he argued, trying to avoid any meltdowns on their watch. The Roh administration has shifted gears as well, focusing on redistributing Korea's wealth instead of spurring new development and sending inconsistent signals to the business community. Still, all is not lost, Chon assured his audience. He remains bullish on Korea in the long term, he said, since the country just needs to change its thinking. Leaders in the public and private sector need to abandon their mercantilist mindset, which focuses exclusively on manufacturing and exports, and cultivate domestic consumption and growth in the service sector. Above all, Chon concluded, they need to re-acquaint themselves with risk.


About the Speaker
David Chon is a principal at Discovery Capital Management, who is responsible for macroeconomic analysis and equity investments. He has over 15 years of experience in macroeconomic analysis, quantitative model development, equity investment strategy and research, and portfolio management. Previously, he was a managing partner at TriStar Advisors, a global equity hedge fund. Chon was also a managing director in the research department at Bear Stearns, as the chief global emerging markets equity strategist. He was also an international economist at Bear Sterns covering Asia, Europe, and Latin America. Chon earned a bachelor’s degree with honors in economics from Columbia University and an MBA from Columbia Business School.



with

David Chon
Principal, Discovery Capital Management

Thursday, February 3, 2005